Belarusian arms industry struggles to survive under Kremlin pressure

On 25 April, Belarus ' State Military Industrial Committee announced that in the first quarter of 2016 its defence industrial enterprises had increased exports by 31 per cent compared to the previous year. Their net profit grew even more,...

Image: belvpo.com

On 25 April, Belarus ' State Military Industrial Committee announced that in the first quarter of 2016 its defence industrial enterprises had increased exports by 31 per cent compared to the previous year. Their net profit grew even more, by 1.6 times.

Remarkably, the Belarusian defence industry has succeeded even while Moscow continues its policy of restricting access to Russian markets for Belarusian defence firms. The Kremlin continues to design substitutes for Belarusian products.

Minsk is responding by cooperating with Ukraine, China and numerous developing countries. The Kremlin is effectively forcing Belarusians to distance themselves from Moscow and build the economic foundations for an independent state.

Why MZKT is so important

On 20 April, President Alexander Lukashenka announced that Minsk would sell Russia the Minsk Wheeled Tractors Factory (MZKT) only if Moscow gave Belarus some oil deposits in Siberia. The Moscow-based Vzglyad daily commented that Lukashenka himself realised that the Kremlin will neither pay the price he demanded nor give him an oil deposit.

MZKT for many years has provided Soviet and later Russian missile and rocket systems with chassis. Among them are the famous missile system Iskander, multiple rocket launcher systems Uragan and Grad, surface-to-air missile systems Tor, Buk, S-300 and S-400, ballistic missile systems Topol and Yars, and others. According to Russian experts, Russia buys between 60 per cent and 90 per cent of MZKT's production.

Throughout the 2010s, Russian firms repeatedly claimed to have designed replacements for the Belarusian MZKT chassis. This happened most recently in March when Almaz-Antei said it was ready to cease using Belarusian products. Yet Moscow still wants to acquire MZKT products and Russian firms continue to install their weapons on Belarusian chassis. This raises questions about the veracity of Russia's claims and threats.

Kremlin bent on substituting its Belarusian allies

Russia started to design replacements for the MZKT chassis as early as 2010 and has been trying to do so consistently since. It points to a clear political line. One leading Russian military expert, deputy director of the Russian Centre for analysis of strategies and technologies Konstantin Makiyenko confirmed to Vzglyad,

“The strategy of import substitution concerns not only Western and Ukrainian products […]. It is a global concept. Russia, after burning its hands on Ukraine and Europe, strives to substitute imports across the spectrum […] We are ready to completely abandon the Belarusian products [of the defence industry].”

The Kremlin's official policies reflect that. Recently, Minsk even complained to the Eurasian Economic Commission (EEC), a body established in the course of Eurasian integration, about Russian regulations on defence orders. Specifically, it challenged the decision of Russia's cabinet of ministers of 29 December 2015 that restricted acquisition of foreign goods and services for Russia's defence needs.

On 12 April, the EEC recognised that the Russian government had violated the principle of equal access to the government's orders for participants in the Eurasian integration process. But Minsk has nothing to celebrate: Moscow is known to have simply ignored earlier such verdicts of the EEC.

Ukraine as a solution

The Kremlin is effectively destroying an important link between Belarus and Russia by disrupting industrial cooperation that goes back to Soviet times. Russian experts – and probably the Russian government – believe that the Belarusian defence industry in general and the MZKT in particular have no choice but to work for Russia. Vice President of the Russian Union of Engineers Ivan Andrievski emphasised that “It would be problematic for the MZKT to find access to European and other markets.”

It is partly true. Belarusian industry is hardly currently in a position to find a good replacement for Russian markets and partners. But if Putin attempts to squeeze Belarusians out of Russia, they are not going to surrender and are already working on alternatives.

Belarus' continuing large-scale cooperation with Ukraine fits this pattern. The most well known illustration of this concerns MAZ activities in Ukraine. In March Belarusian truck manufacturer MAZ signed an agreement on establishing a production line of trucks in Ukraine's Cherkasy with the Ukrainian corporation Bohdan. It will manufacture trucks according to both civilian and military modifications using Belarusian and Ukrainian components. That creates an alternative to the established Ukrainian KrAZ truck production works.

Ukrainian president Petro Poroshenko allegedly responded to criticism about neglecting the existing KrAZ production by explaining that Belarusian trucks successfully passed the necessary tests and are more resilient in combat conditions. On the basis of MAZ-6317 the Ukrainians have also designed an armoured vehicle for their police and National Guard.

According to MAZ's own information, the company has become a leader in sales of trucks of a corresponding type in Ukraine after providing Kyiv with 294 trucks in 2015. According to Lyashko, in February Kyiv may have bought another 120 MAZ trucks.

New markets already bring profits

Belarus continues to do numerous defence industrial projects with China or other, more distant countries. In March a military parade in Myanmar featured surface-to-air missile system Kvadrat-M modernised by the Belarusian firm Alevkurp. Incidentally, its launchers also operate on the MZKT chassis. Another Belarusian firm, Minotor-Service, last year modernised almost 500 BTR-50s for Egypt.

Circumstantial evidence points to some unpublicised major deals on military equipment being underway with Pakistan. Recent months have seen other significant breakthroughs. On 26-27 February Defense Minister of Thailand Prawit Wongsuwan came to Minsk. On 28-30 April he was followed by Defence Minister of Indonesia Ryamizard Ryacudu who was also received at the highest level, by Lukashenka.

These efforts to diversify the markets and partners of the Belarusian defence industry have already brought some results. The National defence industry achieved good results not only in the first months of this year but also in 2015.

Based on the results of the economic activity of Belarusian firms in 2015, the government has included on its list of the 29 most profitable national enterprises three major defence firms. That represents not only an honour but also a commitment to make a contribution to the state budget fund of national development.

Russian politicians and experts are quick to dismiss their official Belarusian allies. The Kremlin apparently believes that Minsk has no choice but to gradually surrender Russians national economic assets or even statehood. That is the mindset that Russian leaders have displayed with regard to former Soviet nations since 1991. History proved them wrong many times as the former Soviet countries distanced themselves from Russia after experiencing such attitudes. Belarus could become just another such case.

In April, Belarus and Europe continued re-establishing contact at different levels. Belarus welcomed the Bulgarian foreign minister and senior diplomats from Sweden and Bosnia and Herzegovina. At the institutional level, Minsk and Brussels inaugurated their new dialogue format, the Coordination Group.

Belarus’ economic interests prompted the government to call for stronger relations with the “Remote Arc” countries, in particular, Nigeria and Ghana. In New York, foreign minister Vladimir Makei focused on social issues and development agenda.

Belarus – Europe: the bilateral dimension

On 10-12 April, Bulgarian foreign minister Daniel Mitov paid a working visit to Minsk and met his Belarusian counterpart Vladimir Makei. Mitov stressed Bulgaria’s willingness to contribute to improving Belarus-EU relations but emphasised the need for respect of human rights in Belarus.

Mitov came to Belarus not only in his national capacity but also as the current chairman of the Committee of Ministers of the Council of Europe. Minsk is interested in greater involvement of Belarusian parliamentarians in the work of this organisation. In this context, Mitov met Vladimir Andreichenko, the chairman of the lower house of the Belarusian parliament.

Belarus and Sweden continued to strengthen their bilateral ties, which are now close to full normalisation after the teddy bear airdrop incident in 2012. On 31 March-1 April, state secretary for foreign affairs Annika Söder met Vladimir Makei and his deputy Alena Kupchyna in Minsk. It was the first visit of a Swedish official to Belarus at such a level for 25 years. Söder also met Belarusian opposition leaders.

On 22 April, Belarus and Bosnia and Herzegovina held their first political consultations at the deputy foreign minister level since 2007.

In Minsk, Alena Kupchyna and Josip Brkić focused on further development of the two countries’ trade relations. Belarus and Bosnia and Herzegovina have so far been unable to establish the bilateral trade commission provided for in their trade agreement of 2004.

The parties also discussed regional cooperation, as Bosnia and Herzegovina holds the presidency of the Central European Initiative (CEI) in 2015. Belarus recently downgraded the level of its participation in this regional forum despite the fact that most of the Belarusian government’s sympathisers in Europe (such as Austria, Hungary, Italy, Slovenia etc.) also participate in the CEI.

Belarus – Europe: the institutional dimension

In Brussels on 6-7 April, Belarus and the European Union launched a new format of bilateral dialogue, the EU-Belarus Coordination Group. This informal negotiation platform emerged as a follow-up to the Interim Phase on modernisation issues. Alena Kupchyna and Deputy Secretary General for the External Action Service Helga Schmid headed the respective delegations.

Belarus and the EU identified eleven priorities for the dialogue, with trade, investment, environment and infrastructure dominating the agenda. However, the parties have also been discussing the establishment of a national institute for human rights in Belarus. The EU will sponsor a workshop on this issue in Minsk later this year.

Representatives of Belarusian civil society participated in one session of the coordination group and were able to comment on the dialogue’s priorities. Belarus’ Ministry of Foreign Affairs validated each candidature.

The Konrad Adenauer Foundation financed a trip of a team of Belarusian officials and experts to Brussels on 18-21 April. They discussed security and defence issues with officials from NATO, the European Parliament and the European External Action Service as well as think tanks.

Makei works hard in New York

On 20-22 April, Makei was in New York on an extremely tight schedule. There, he signed the Paris Climate Agreement on behalf of Belarus and spoke at the United Nations' special high-level events on sustainable development goals and drug trafficking.

The minister opened a photo exhibition at the UN headquarters dedicated to the 30th anniversary of the Chernobyl disaster. He also met his counterparts from Argentina, Costa Rica, Singapore and Tajikistan as well as high UN officials.

Finally, Makei participated in the first-ever high-level meeting of the Eastern European Group (EEG). Belarus chairs the group in April. The uniqueness of the EEG is that it assembles the countries which belong to competing economic and military blocs in Europe.

Normally, the EEG’s role has been limited to deciding on the distribution of seats at various UN bodies and performing other procedural functions at the organisation. Lately, Belarus has been working on uniting the EEG’s members behind the common agenda of UN reform and strengthening the group’s role and visibility at the UN.

In recent years, Belarusian diplomats have successfully moved from a reactive response to the UN agenda set by others to identifying and pursuing the country’s priorities in multilateral diplomacy.

Reinforcing the “Remote Arc”

Deputy foreign minister Valentin Rybakov made a tour in Western Africa, visiting Nigeria on 4-5 April and Ghana on 6-7 April.

The political consultations between the foreign ministries were held both in Abudja and Accra. However, trade relations and academic training of African students in Belarus remain at the top of Belarus’ agenda in its relations with Nigeria and Ghana.

Rybakov came to Africa accompanied by Belarusian manufacturers of agricultural and transport machinery. Minsk is seeking to develop local assembly of its tractors in Nigeria and trucks in Ghana.

On 14 April, Belarusian president Alexander Lukashenka, on the sidelines of the summit of the Organisation of Islamic Cooperation, met the leaders of Afghanistan, Indonesia, Qatar and Pakistan, with trade and manufacturing cooperation the focus of the discussions.

Belarus has rather a limited diplomatic presence in Africa. Cooperation with the African Union may help to enter the African markets and participate in pan-African economic and technical cooperation programmes.

In late April, Belarusian officials also discussed the development of trade relations with Sudan in Minsk and Qatar in Doha in the format of the bilateral cooperation commissions.

Lukashenka recently instructed his government and Belarusian diplomats on the need to achieve a new balance in Belarusian exports. They should be equally distributed – one third each – among the Eurasian Economic Union (EEU), the EU and other countries, including the so called “Remote Arc” countries (Africa, Asia and Latin America).

Currently, the share of the EEU in Belarusian exports stands at over 42 per cent, with the EU at 32 per cent. This means that the share of the “Remote Arc” will have to grow significantly at the expense of Russia and other EEU members.